Friday, February 26, 2016

The Other Power of Money

During the Oshkosh School Board discussion this week, member Barbara Herzog used one of the favorite analogies when it comes to increased government spending. She pulled from her pocket a quarter--representing what it would cost the average homeowner in Oshkosh every day if the April referendum is approved. She talked about how you can't really buy anything with that quarter if you were to spend it yourself. But if you gave that quarter to the school district every day--and they added it to all of the quarters paid by everyone else in the district, they could have 28-million dollars worth of programs, security additions and keep open three school buildings.

It sounds like a great deal--if you only see money as something that has to be spent every day. But money has another possible use--and that is for saving. Putting away a quarter a day may not sound like much when it comes to a nest egg, but just like the quarters piled up by the school district, the daily quarters you keep can add up as well.

Take for instance a homeowner who puts away a quarter a day in a growth stock mutual fund starting the day their child is born. If that homeowner sees the average stock market growth rate of 8% a year, that mutual fund would have 44-hundred dollars in it when the child graduates from high school in 18-years. That would be almost enough to pay for an entire year of tuition and fees at UW Fox Valley--and mean less in student loan debt and less need for public financial aid.

If that same homeowner put away a quarter a day into an IRA for their entire 40 year working careers and saw the same 8% annual growth that would give them more than $30,000--enough to live on for an entire year--and less dependence on Social Security to make ends meet. An average of 10% growth over those 40 years would mean more than 52-thousand dollars--again, all on just a quarter a day.

Yes it is true that trying to spend a quarter a day won't get you very much--but saving a quarter a day can get you plenty in the long run. And you won't need to take everybody else's quarters to do it.